Durbin Slams Bailed-Out Bank of America Over New Debit Card Fee

March 8: Pedestrians walk past a Bank of America sign on the street in New York.
(Reuters)

A top senator slammed Bank of America after the company, one of the largest recipients of U.S. taxpayer bailouts, announced it would charge customers a new $5 monthly fee for using their debit cards -- even if just to buy a $2 coffee.

Though the bank does not plan to charge customers for using the ATM, the fee would be triggered on a monthly basis if shoppers use their debit cards to make any purchase.

"It's overt, unfair and I hope their customers have the final say," Sen. Dick Durbin, D-Ill., said.

An industry representative said such fees may become more prevalent as banks try to make up for lost revenue from a different kind of fee that will be capped under a new set of financial regulations.

But the Bank of America decision drew outrage for several reasons. The company is the largest U.S. bank by deposits. And it reaped $45 billion in federal bailout money -- receiving the first chunk in 2008 and the rest in 2009 to cope with losses at Merrill Lynch.

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"It seems that old habits die hard for Bank of America. After years of raking in excess profits off an unfair and anti-competitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers," Durbin said in a statement.

Though banks may be trying to make up for lost profit from the old system, Durbin said that system was unfair. Before, banks were collecting billions in fees from merchants from whenever customers swiped their debit cards. Starting Oct. 1, a regulation will cap those fees.

"Banks that try to make up their excess profits off the backs of their customers will finally learn how a competitive market works," Durbin warned.

Bank of America repaid all the bailout money it received in late 2009 -- the federal government made more than $4 billion off the arrangement.

The new fee will apply to basic accounts and will be in addition to any existing monthly service fees.

For example, one of the bank's basic accounts charges a $12 monthly fee unless customers meet certain conditions, such as maintaining a minimum average balance of $1,500.

A fee for using debit cards is still a novel concept for many consumers and was unheard of before this year. But there are signs it may soon become an industry norm.

SunTrust, a regional bank based in Atlanta, began charging a $5 debit card fee on its basic checking accounts this summer. Regions Financial, which is based in Birmingham, Ala., plans to start charging a $4 fee next month.

Chase and Wells Fargo are also testing $3 monthly debit card fees in select markets. Neither bank has said when it will make a final decision on whether to roll out the fee more broadly.

This summer, an Associated Press-GfK poll found that two-thirds of consumers use debit cards more frequently than credit cards. But when asked how they would react if they were charged a $3 monthly debit card fee, 61 percent said they'd find another way to pay.

If the fee were $5, 66 percent said they would also change their payment method.

Bank of America's debit card fee will be rolled out in stages starting with select states in early 2012. The company would not say which states would be affected first.